NOTES
TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE
30, 2016
Note 1
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Interim
Reporting
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While
the information presented in the accompanying interim six months consolidated financial
statements is unaudited, it includes all adjustments, which are, in the opinion of management,
necessary to present fairly the financial position, results of operations and cash flows
for the interim periods presented in accordance with accounting principles generally
accepted in the United States of America. These interim financial statements follow the
same accounting policies and methods of their application as the Company’s December
31, 2015 annual consolidated financial statements. All adjustments are of a normal recurring
nature. It is suggested that these interim financial statements be read in conjunction
with the Company’s December 31, 2015 annual financial statements. Operating results
for the six months ended June 30, 2016 are not necessarily indicative of the results
that can be expected for the year ended December 31, 2016.
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Note 2
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Nature
and Continuance of Operations
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The
Company was incorporated on June 15, 1998 in the State of Nevada, USA and the Company’s common shares are publicly traded
on the OTC Bulletin Board.
Up
until fiscal 2014, the Company was in the business of mineral exploration. On May 28, 2014, the Company formalized an agreement
whereby it purchased assets associated with a smokeless cannabis delivery system. The Company planned to develop this system for
commercial purposes. On December 14, 2014, this asset purchase agreement was terminated.
On
January 21, 2015, a majority of the Company’s stockholders approved a consolidation of the issued and outstanding shares
of common stock, on a 10 for 1 basis, thereby decreasing the issued and outstanding share capital from 113,020,000 to 11,302,000.
On March 11, 2015, the Company effectively changed its name from Madison Explorations, Inc. to Madison Technologies Inc. and effected
the stock consolidation. These financial statements give retroactive effect to both these changes.
These
consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to
a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next
twelve months. Realization values may be substantially different from carrying values as shown and these financial statements
do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities
should the Company be unable to continue as a going concern. At June 30, 2016, the Company had not yet achieved profitable operations,
has accumulated losses of $528,517 since its inception and expects to incur further losses in the development of its business,
all of which casts substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability
to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary
financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management
has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by
equity financing and/or related party advances. That said, there is no assurance of additional funding being available.
Note 3
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Summary
of Significant Accounting Policies
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T
here
have been no changes in accounting policies from those disclosed in the notes to the audited consolidated financial statements
for the year ended December 31, 2015.
Form
10-Q – Q2
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Madison
Technologies, Inc.
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Page
8
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Note 4
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Recent
Accounting Pronouncements
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The
Company adopts new pronouncements relating to generally accepted accounting principles applicable to the Company as they are issued,
which may be in advance of their effective date. Management does not believe that any pronouncement not yet effective but recently
issued would, if adopted, have a material effect on the accompanying financial statements.
The
Company has two notes payable to Paleface Holdings Inc. Each note is unsecured and payable on demand.
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a)
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$25,000
note with annual interest payable at 8%.
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As
at June 30, 2016, accrued interest on the note was $22,797 (June 30, 2015 - $20,797). The note payable balance including accrued
interest was $47,797 as at June 30, 2016 (June 30, 2015 - $45,797). Interest on the debt for each of the six months ended June
30 was $1,000.
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b)
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$23,150
($30,000 CDN) with annual interest payable at 5%
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As
at June 30, 2016, accrued interest on the note was $10,708 (June 30, 2015 - $10,015). The note payable balance including accrued
interest was $33,857 as at June 30, 2016 (June 30, 2015 - $34,294). Interest on debt for the six months ended June 30 was $578
in 2016 and $600 in 2015.
The
company also has an unsecured note payable on demand to Gens Incognito Inc. for $25,000. As
at June 30, 2016, accrued interest
on the note was $6,202 (June 30, 2015 - $3,194). The note payable balance including accrued interest was $31,202 as at June 30,
2016 (June 30, 2015 - $28,194)
Note 6
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Related
Party Advance
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In
2008 the President advanced the Company $561 repayable without interest or any other terms. The unpaid balance as at June 30,
2016 is $261. There were no related party transactions during the six months ended June 30, 2016.
On
January 21, 2015, a majority of the Company’s stockholders approved a consolidation of the issued and outstanding shares
of common stock, on a 10 for 1 basis, thereby decreasing the issued and outstanding share capital from 113,020,000 to 11,302,000.
This was effected on March 11, 2015. This consolidation has been applied retroactively and all references to the number of shares
issued reflect this consolidation.
On
June 15, 1998 the Company authorized and issued 5,375,000 shares of its common stock in consideration of $430 in cash. ($.00008
per share.)
On
June 7, 2004 the Company issued 5,907,000 in consideration of $472 in cash. ($.00008 per share.)
On
June 14, 2001 the Company approved a forward stock split of 5,000:1. These financial statements have been retroactively adjusted
to effect this split.
On
March 30, 2006 the Company entered into a private placement agreement whereby the Company issued 20,000 Regulation-S shares in
exchange for $50,000. ($2.50 per share).
There
are no shares subject to warrants, options or other agreements as of June 30, 2016.
Form
10-Q – Q2
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Madison
Technologies, Inc.
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Page
9
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Note 8
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Convertible
Notes Payable
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In
total there are nine convertible notes payable. All notes are non-interest bearing, unsecured and payable on demand. The notes
are convertible into common stock at the discretion of the holder on four different conversion rate: $0.01 debt to 1 common share,
$0.045 to 1; $0.005 to $1 and $0.15 to 1. The effect that conversion would have on earnings per share has not been disclosed due
to the anti-dilutive effect.
There
are four convertible notes payable convertible on the basis of $0.01 of debt to 1 common share
.
The
balance of the first convertible note payable convertible on the basis of $0.01 of debt to 1 common share is as follows:
Balance
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Jun
30, 2016
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Dec
31, 2015
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Proceeds from promissory
note
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$
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40,000
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$
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40,000
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Value allocated
to additional paid-in capital
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40,000
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40,000
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Balance allocated to convertible note
payable
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-
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-
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Amortized discount
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40,000
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40,000
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Balance, convertible
note payable
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$
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40,000
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$
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40,000
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The
total discount of $40,000 was amortized over 5 years starting April, 2008.
No
interest was charged in the six months ending June 30, 2016 or for the year ending December 31, 2015.
The
balance of the second convertible note payable convertible on the basis of $0.01 of debt to 1 common share is as follows:
Balance
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Jun
30, 2016
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Dec
31, 2015
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Proceeds from promissory
note
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$
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20,000
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$
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20,000
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Value allocated
to additional paid-in capital
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20,000
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20,000
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Balance allocated to convertible note
payable
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-
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-
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Amortized discount
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20,000
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20,000
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Balance, convertible
note payable
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$
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20,000
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$
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20,000
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The
total discount of $20,000 was amortized over 5 years starting June, 2010. No interest was recorded in the six months ended June
30, 2016. Interest of $2,000 was recorded for the six months ended June 30, 2015.
Form 10-Q – Q2
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Madison Technologies, Inc.
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Page
10
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The
balance of the third convertible note payable convertible on the basis of $0.01 of debt to 1 common share is as follows:
Balance
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Jun
30, 2016
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Dec
31, 2015
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Proceeds from promissory
note
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$
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25,000
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$
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25,000
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Value allocated
to additional paid-in capital
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25,000
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25,000
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Balance allocated to convertible note
payable
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-
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-
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Amortized discount
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20,000
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17,750
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Balance, convertible
note payable
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$
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20,000
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$
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17,750
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The
total discount of $25,000 is being amortized over 5 years starting July, 2012. Accordingly, the annual interest rate is 20% and
for the six months ended June 30, 2016 and 2015, $2,500 was recorded as interest expense. As at June 30, 2016 the unamortized
discount is $5,000.
The
balance of the fourth convertible note payable convertible on the basis of $0.01 of debt to 1 common share at is as follows:
Balance
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Jun
30, 2016
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Dec
31, 2015
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Proceeds from promissory
note
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$
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25,000
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$
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25,000
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Value allocated
to additional paid-in capital
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25,000
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25,000
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Balance allocated to convertible note
payable
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Amortized discount
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16,250
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13,750
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Balance, convertible
note payable
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$
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16,250
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$
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13,750
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The
total discount of $25,000 is being amortized over 5 years starting April, 2013. Accordingly, the annual interest rate is 20% and
for the six months ended June 30, 2016 and 2015, $2,500 was recorded as interest expense. As at June 30, 2016 the unamortized
discount is $8,750.
There
are two convertible notes payable convertible on the basis of $0.005 of debt to 1 common share
The
balance of the first convertible note payable convertible on the basis of $0.005 of debt to 1 common share is as follows:
Balance
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Jun
30, 2016
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Dec
31, 2015
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Proceeds from promissory
note
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$
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10,000
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$
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10,000
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Value allocated
to additional paid-in capital
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10,000
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10,000
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Balance allocated to convertible note
payable
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-
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-
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Amortized discount
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10,000
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9,500
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Balance, convertible
note payable
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$
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10,000
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$
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9,500
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Form
10-Q – Q2
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Madison
Technologies, Inc.
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Page
11
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The
total discount of $10,000 is being amortized over 5 years starting April, 2011. Accordingly, the annual interest rate is 20% and
for the six months ended June 30, 2016, $750 was recorded as interest expense and $1,000 was recorded as interest expense for
the six months ended June 30, 2015.
The
balance of the second convertible note payable convertible on the basis of $0.005 of debt to 1 common share is as follows:
Balance
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Jun
30, 2016
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Dec
31 2015
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Proceeds from promissory
note
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$
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10,000
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$
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10,000
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Value allocated
to additional paid-in capital
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10,000
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10,000
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Balance allocated to convertible note
payable
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-
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-
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Amortized discount
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10,000
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9,250
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Balance, convertible
note payable
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$
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10,000
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$
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9,250
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The
total discount of $10,000 is being amortized over 5 years starting May, 2011. Accordingly, the annual interest rate is 20% and
for the six months ended June 30, 2016, $750 was recorded as interest expense and $1,000 was recorded as interest expense for
the six months ended June 30, 2015.
There
is one convertible notes payable convertible on the basis of $0.045 of debt to 1 common share
The
balance of this convertible note payable is as follows:
Balance
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Jun
30, 2016
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Dec
31, 2015
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Proceeds from promissory
note
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$
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25,000
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$
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25,000
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Value allocated
to additional paid-in capital
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25,000
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25,000
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Balance allocated to convertible note
payable
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-
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Amortized discount
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10,833
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8,333
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Balance, convertible
note payable
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$
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10,833
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$
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8,333
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The
total discount of $25,000 is being amortized over 5 years starting May, 2014. Accordingly, the annual interest rate is 20% and
for the six months ended June 30, 2016 and 2015, $2,500 was recorded as interest expense. As at June 30, 2016 the unamortized
discount is $14,167.
Form
10-Q – Q2
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Madison
Technologies, Inc.
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Page
12
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There
is one convertible notes payable convertible on the basis of $0.15 of debt to 1 common share
The
balance of this convertible note payable is as follows:
Balance
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Jun
30, 2016
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Dec
31, 2015
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Proceeds from promissory
note
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$
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25,000
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$
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25,000
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Value allocated
to additional paid-in capital
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25,000
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25,000
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Balance allocated to convertible note
payable
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Amortized discount
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6,250
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3,750
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Balance, convertible
note payable
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$
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6,250
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$
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3,750
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The
total discount of $25,000 is being amortized over 5 years starting April, 2015. Accordingly, the annual interest rate is 20% and
for the six months ended June 30, 2016 and 2015, $2,500 was recorded as interest expense. As at June 30, 2016 the unamortized
discount was $18,750.
There
is one convertible notes payable convertible on the basis of $0.05 of debt to 1 common share
The
balance of this convertible note payable is as follows:
Balance
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Jun
30, 2016
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Dec
31, 2015
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Proceeds from promissory
note
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$
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21,000
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$
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-
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Value allocated
to additional paid-in capital
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21,000
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-
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Balance allocated to convertible note
payable
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-
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|
-
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Amortized discount
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700
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-
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Balance, convertible
note payable
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$
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700
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$
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-
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The
total discount of $21,000 is being amortized over 5 years starting May, 2016. Accordingly, the annual interest rate is 20% and
for the six months ended June 30, 2016, $700 was recorded as interest expense and $0 was recorded as interest expense for the
six months ended June 30, 2015. As at June 30, 2016 the unamortized discount is $20,300.
Form
10-Q – Q2
|
Madison
Technologies, Inc.
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Page
13
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Forward
Looking Statements
This
quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve risks
and uncertainties, including statements regarding Madison’s capital needs, business plans and expectations. Such forward-looking
statements involve risks and uncertainties regarding Madison’s ability to carry out its planned exploration programs on
its mineral properties. Forward-looking statements are made, without limitation, in relation to Madison’s operating plans,
Madison’s liquidity and financial condition, availability of funds, operating and exploration costs and the market in which
Madison competes. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking
statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”,
“should”, “expect”, “plan”, “intend”, “anticipate”, “believe”,
“estimate”, “predict”, “potential” or “continue”, the negative of such terms or
other comparable terminology. Actual events or results may differ materially. In evaluating these statements, you should consider
various factors, including the risks outlined below, and, from time to time, in other reports Madison files with the SEC. These
factors may cause Madison’s actual results to differ materially from any forward-looking statement. Madison disclaims any
obligation to publicly update these statements, or disclose any difference between its actual results and those reflected in these
statements. The information constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform
Act of 1995. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.